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Signet Jewelers (SIG - Free Report) is a Zacks Rank #5 (Strong Sell) that is a retailer of diamond jewelry, watches as well as other products.

The stock has rallied nicely with the overall market, but investors might be getting ahead of themselves. A recent earnings report showed the company struggled when compared to last year and Same Store Sales (SSS) were off by double digits. Moreover, the company cut the guidance and estimates are falling.
 

About the Company

Signet is headquartered in Hamilton, Bermuda. The company operates through three segments: North America, International, and Other.

Many familiar brands known in the U.S. are Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Jewelers, Zales Outlet, Diamonds Direct, James Allen, Banter by Piercing Pagoda, and Peoples Jewellers names, as well as operates online through its digital banners, James Allen and Blue Nile.

The company is valued at $3.3B and employs 30,000. The stock has a Forward PE of 7 and pays a dividend of 1.3%. The stock holds Zacks Style Scores of “A” in Value, but “F” in Growth and “D” in Momentum.
 

Q1 Earnings

In early June, Signet reported an earnings beat of 24%. Beating on the bottom line is what the company does, and it has not missed since 2017. But looking closer, the y/y revenue was down to $1.69B from $1.84B last year.

The company cut its FY24 outlook and guided for a weak Q2 citing a deceleration of trends and a softer-than-expected Mother’s Day.

Q2 revenues are expected to come in at a range of $1.53-1.58B v the expected $1.73B. FY24 is now seen at a range of $9.49-$10.09 v the $11.18 expected. SSS were down 13.9% year over year.

The stock’s immediate reaction was to go lower, but it bounced above some technical resistance levels. After a more than 10% rally, investors might be getting ahead of themselves as estimates continue to march lower.
 

Estimates

Over the last 60 days, analysts have cut estimates for all time-frames.

For the current quarter, analysts have dropped their numbers from $2.65 to $1.34, or 49%.

For the next quarter, analysts lowered estimates from $1.02 to $0.75, or 26%.

Longer term, numbers are falling as well. Next year’s estimates have gone from $12.03 to 10.46 or 13%.
 

Technical Take

The stock market rally has really helped SIG lift higher. However, investors might be getting ahead of themselves as the stock approaches the upper end of its 52-week range. $75 will be a tough nut to crack and the bears will likely step in.

The 200-day MA is around the $69 level and will be watched by both sides. A move back under that level and the recent rally could be considered a failure. Signet investors are familiar with that “failure” word as the stock has traded from $150 to $6 back to $110 and down to $50 before the 2023 up move.

Expect volatile action that will be amplified with any news on earnings.
 

In Summary

Looking back to the last miss in 2017, the stock was at $60. This was right where it was trading before the recent rally. Meaning that while the stock has seen some big volatile moves, there has been no real appreciation in the name despite all the earnings outperformance.

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